Default on $42 million in debt for the Greater Wenatchee Regional Town Toyota Arena likely will cost Franklin County its $300,000 investment.
The county put up the money in 2009 as a short-term investment on bond anticipation notes that were scheduled to be paid Thursday.
The Greater Wenatchee Regional Events Center Public Facilities District was unable to meet the deadline. It defaulted, leaving Franklin County and about 400 other investors, including Central Washington University, with no return on their money.
The Ellensburg university had $1.6 million invested. The default could mean up to $6.5 million in losses for all investors, according to Washington State Wire.
Danielle Pardini, chief deputy treasurer for Franklin County, confirmed the investment was made and that it was at risk.
County commissioner Brad Peck said if the $300,000 can't be recovered, it will reflect on the county's general fund balance, driving slim reserves even lower.
Commissioners have not approved the 2012 budget yet, but Peck said the reserves were "about as low as I'm comfortable with now."
Franklin County's budget has been hit hard by high defense trial costs.
"We're running pretty lean, so I'm concerned," he said.
Wenatchee's public facilities district built the arena expecting $1 million in annual profits, but it ran $1.6 million to $2.5 million in the red, according to a state auditor's report in 2010.
The $42 million in bonds was supposed to be a financial bridge until better financing could be obtained in the form of municipal bonds, backed by the city of Wenatchee.
Sen. Linda Evans Parlette, R-Wenatchee, said a judge ruled in September that the project didn't have the financial ability to back municipal bonds. That sunk the facilities district's lifesaver.
Annual interest on the bond anticipation notes is almost $2.2 million, but the facilities district hasn't been able to pay more than $580,000 a year, according the state auditor.
With the facilities district, the city of Wenatchee, and eight other public entities who backed the arena project unable to buy their way out of the debt, Parlette looked to the Legislature to be Wenatchee's lifeboat.
Parlette said the Legislature's indecision about rescuing the Wenatchee agency from a $42 million default before the 10 a.m. deadline Thursday could have a ripple effect on other public facilities districts across the state that are looking to sell bonds for their projects.
"We've been in communication with convention centers in Seattle and Spokane," Parlette said.
Dan Legard, Kennewick's finance manager, said the city completed a refinancing of bonds for the Three Rivers Convention Center, only days before Thursday's default.
The refinancing was successful and was not affected by the Wenatchee situation, Legard said.
Kennewick City Manager Marie Mosley said, "We sold the bonds two weeks ago. We were concerned about a possible effect with Wenatchee, but we were never of the understanding that it was an issue (for the buyer of our bonds).
"We are very pleased with the results of the bond issue. We saved over $450,000 for taxpayers over the life of the bonds," she added.
Wenatchee's 4,300-seat indoor arena is owned by nine public agencies in Chelan and Douglas counties. It was proposed, built and managed by Global Entertainment Corp. of Phoenix, Ariz. It opened in late 2008.
However, the Wenatchee facilities district fired Global in May 2009. The arena never performed as Global predicted.
There still is a chance Wenatchee may get what it needs from the state Legislature.
On Thursday, Rep. Ross Hunter, D-Bellevue, told The Associated Press that the Ways and Means Committee he chairs will consider a measure that would make a belated payment on the $42 million bond debt. A spokesman for the state treasurer said the bond market would be more receptive to a late payment than an outright default.
State officials are concerned the default may affect other local agencies looking to borrow. Still, lawmakers have been reluctant to endorse the rescue plan, worried that it may make the state a backstop for bad debt.
The proposal would use a state fund for local sales taxes to cover the debt and allow local jurisdictions to pay back over time.
Parlette said while the new legislation drafted in the House is scheduled to be heard today, she is working to find the necessary votes in the Senate.